Court of Appeal for Ontario

CITATION: Chaba v. Khan, 2020 ONCA 643

DATE: 20201016

DOCKET: C67094

Doherty, Hoy and Jamal JJ.A.

BETWEEN

Sam Chaba

Plaintiff (Respondent)

and

Muhammad Aslam Khan

Defendant (Appellant)

AND BETWEEN

Swat Emeraldmine and Marketing Inc.

Plaintiff by Counterclaim (Appellant)

and

Surinder Chaba a.k.a. Sam Chaba, Monica Goyal and Jonathan MacKenzie

Defendants to the Counterclaim (Respondent)

Muhammad Aslam Khan, for the appellants

Richard H. Parker, Q.C., for the respondent

Heard: In writing

On appeal from the judgment of Justice Grant R. Dow of the Superior Court of Justice, dated May 22, 2019, with reasons reported at 2019 ONSC 2093, and from the costs order, dated January 16, 2020, with reasons reported at 2020 ONSC 154.

REASONS FOR DECISION

[1] The appellants — Muhammad Khan (“Khan”), a lawyer, and Swat Emeraldmine and Marketing Inc., a corporation to which Khan assigned his interest in this litigation — appeal from the order of the trial judge dismissing Khan’s counterclaim against the respondent, Sam Chaba (“Chaba”). The counterclaim sought damages for fraudulent misrepresentation and inducing breach of contract arising from refinancing a residential property owned by Nicanor and Irene Posadas (“the Posadas”). The appellants also seek leave to appeal the trial judge’s costs order.

[2] For the reasons that follow, the appeal is dismissed. Leave to appeal costs is granted but the costs appeal is dismissed.

Background

[3] In 2012, the Posadas bought a house, financed partly with an $80,000 loan from Khan. Because the Posadas did not make their monthly payments on the loan, their debt to Khan grew with interest to over $100,000. Khan registered the debt as a charge on the property and later obtained an order for possession. A notice of sale was issued to be effective June 24, 2014, but the sale was stayed on a temporary basis by order of Mew J. on June 23, 2014. Chaba, a mortgage broker, became involved and tried to arrange for mortgage financing for the Posadas, whose debt to Khan had now grown to about $160,000. Khan and the Posadas agreed to settle the debt (the “first settlement”) on the basis that the Posadas would pay Khan $115,000, with costs of the motion to stay the sale proceedings to be fixed or assessed by the court.

[4] In a schedule to the settlement agreement for the first settlement, dated August 28, 2014, the Posadas signed a promissory note for $115,000 in favour of Khan. Chaba also signed the promissory note as guarantor.

[5] The trial judge rejected Chaba’s evidence that Khan told him he was signing only as a witness and not as guarantor. He found Chaba admitted that it was “my mistake” he did not read what he signed before signing.

[6] On August 29, 2014, Khan and the Posadas appeared before Perell J. and advised that they had reached a settlement. Accordingly, Perell J. dismissed the Posadas’ pending motion to stay the sale proceedings and ordered the Posadas to pay $9,000 in costs as contemplated under the first settlement.

[7] Chaba continued to seek financing for the Posadas, but disputed his role as guarantor and the costs award. He and the Posadas sued Khan for fraudulent misrepresentation, claiming $2 million and $1 million respectively. Khan and the Posadas ultimately agreed to settle the actions on the basis that the Posadas would pay Khan $140,000 (the “second settlement”). Khan also offered to settle with Chaba on the basis that he would be relieved of his obligations as guarantor, though Chaba claims he was not aware of this offer at the time. Khan counterclaimed against Chaba, alleging that Chaba’s fraudulent misrepresentation induced him to enter into first settlement with the Posadas, and alleging that Chaba later induced breach of contract by undermining that settlement.

[8] Chaba and the appellants each moved for summary judgment. At the hearing, Chaba acknowledged he had suffered no damages and that Khan had settled his claims with the Posadas, rendering the guarantee issue moot. Chaba’s claim against Khan was thus dismissed. However, the court found Chaba raised genuine issues requiring a trial regarding Khan’s counterclaim and ordered those claims to proceed to trial. The costs of Chaba’s dismissed action were reserved to the trial judge hearing Khan’s counterclaim.

The trial judge’s decisions

[9] The trial judge dismissed Khan’s counterclaim against Chaba. He concluded Khan had not established Chaba was liable for either fraudulent misrepresentation or inducing breach of contract. He also held Khan’s second settlement with the Posadas relieved Chaba of any obligation as guarantor for the Posadas’ debt.

[10] The trial judge ordered Chaba to pay Khan costs for the main action of $20,000, and ordered Khan to pay Chaba costs for the counterclaim of $18,000, for net costs to Khan of $2,000.

[11] The appellants now appeal the order dismissing the counterclaim and seek leave to appeal the costs order.

Discussion

[12] The appellants raise at least 14 grounds of appeal, some of which contain multiple issues.

[13] In our view, the trial judge made no error of law, and his findings after the three-day trial of the counterclaim must be accorded appellate deference.

[14] The grounds of appeal can be addressed under six topics.

[15] First, the trial judge made no error in dismissing the claim for fraudulent misrepresentation. He correctly cited the elements of fraudulent misrepresentation from Mariani v. Lemstra (2004), 2004 CanLII 50592 (ON CA), 246 D.L.R. (4th) 489 (Ont. C.A.), at para. 12, leave to appeal refused, [2004] S.C.C.A. No. 355:

(1) that the defendant made a false representation of fact; (2) that the defendant knew the statement was false or was reckless as to its truth; (3) that the defendant made the representation with the intention that it would be acted upon by the plaintiff; (4) that the plaintiff relied upon the statement; and (5) that the plaintiff suffered damage as a result.

[16] The trial judge was entitled to conclude on the evidence before him that the appellants failed to establish that Chaba made any false or reckless representation inducing Khan to enter the first settlement with the Posadas. The trial judge stated that he “heard no evidence from either Mr. Khan or Mr. Chaba that would satisfy this tort.” He also concluded that “the terms of the Settlement Agreement vitiates any tangible claim that Mr. Chaba represented anything to Mr. Khan that Mr. Chaba knew to be false or reckless and that Mr. Khan would rely on or act on to his detriment.” These findings were all open to the trial judge on the evidence before him. There is no basis for this court to intervene.

[17] Second, the trial judge made no error in dismissing the claim for inducing breach of contract. He correctly noted that to succeed on this claim, Khan had to establish the four elements identified by this court in Drouillard v. Cogeco Cable Inc., 2007 ONCA 322, 86 O.R. (3d) 431, at para. 26: (1) Khan had a valid and enforceable contract with the Posadas; (2) Chaba was aware of the existence of this contract; (3) Chaba intended to and did procure the breach of the contract; and (4) because of the breach, Khan suffered damages.

[18] The trial judge stated there was no dispute about the first two elements. The dispute related to the third element, which the trial judge found Khan had failed to establish:

At issue is whether Mr. Chaba intended to procure the breach of [the first settlement]. It was in Mr. Chaba’s best interest (a payment of the commission associated with the refinancing) to have the Settlement Agreement fulfilled. There was no evidence from the most likely source to indicate the contrary, being the Posadas, that Mr. Chaba said or did anything to undermine or deter payment of the agreed upon amount to Mr. Khan. Again, one would have expected if that were so, it would have been dealt with in the settlement achieved with the Posadas or Mr. Khan in June, 2016 and presented at this trial.

[19] The trial judge was entitled to make these findings and draw these inferences based on the evidence before him. This court has no basis to intervene.

[20] After discussing the damages Khan alleged he suffered as a result of Chaba’s action, the trial judge remarked that the real source of Khan’s woes was that his intended source of funds for his loan to the Posadas did not clear his bank, as a result of which Khan used funds from his trust account, which he later repaid, to make the loan to the Posadas. The trial judge wrote, “[Khan] failed to ensure the funds to cover the $80,000.00 were either certified before it was deposited or cleared before the $80,000.00 was forwarded to the Posadas. This simple, logical safeguard to the source of Mr. Khan’s problem undermines any legal wrong having been committed against him by Mr. Chaba.” However, the trial judge did not rely on Khan’s failure to employ “[t]his simple, logical safeguard” in dismissing Khan’s counterclaim against Chaba. As we have discussed, he concluded that Khan had not established Chaba was liable for either fraudulent misrepresentation or inducing breach of contract, and there is no basis to intervene with those conclusions.

[21] Third, the trial judge made no error in dismissing the claim to enforce Chaba’s guarantee. He accepted that a lender may have separate claims against both the borrower and their guarantor, but found it was not a term of Khan’s settlement with the Posadas that he could pursue Chaba. The trial judge concluded that “payment of the debt in its entirety was agreed upon”. He found Khan “agreed to accept $140,000.00 (presumably) in full satisfaction of the debt owed to him by the Posadas”.

[22] These conclusions of the trial judge — which arose from his interpretation of the guarantee within the context of the first and second settlements and the other evidence before the court — are all entitled to appellate deference. Again, this court has no basis to intervene.

[23] Fourth, there is no merit to the appellants’ assertion that the trial approached the evidence unfairly by applying differential standards of scrutiny. As noted in R. v. Sahdev, 2017 ONCA 900, 356 C.C.C. (3d) 137, at para. 59, which the appellants cite, “[t]he argument usually fails.” This is because “credibility findings are the province of the trial judge and attract a very high degree of deference on appeal; and appellate courts invariably view this argument with skepticism, seeing it as a veiled invitation to reassess the trial judge's credibility determinations”: at para. 59, citing R. v. Aird, 2013 ONCA 447, 307 O.A.C. 183, at para. 39. To succeed, the appellants “must identify something clear in the trial judge’s reasons or the record indicating that a different standard of scrutiny was applied and something sufficiently significant to displace the deference due to a trial judge’s credibility assessments”: R. v. Gravesande, 2015 ONCA 774, 128 O.R. (3d) 111, at para. 19.

[24] Here, the appellants have not met this standard. The trial judge conducted a fair trial and approached the evidence in a balanced way, accepting the appellants’ evidence on some points but rejecting it on others.

[25] Fifth, there is no merit to the appellants’ contention that the trial judge’s interventions gave rise to a reasonable apprehension of bias. The appellants assert that the trial judge “intervened with massive questions (204) during final submissions of Appellant’s [trial] counsel that made him nervous and unable to properly represent. He could not follow his script and cover all the issues before the court.” However, the trial judge’s questions involved nothing more than the usual back-and-forth between the court and trial counsel. The trial judge advised the appellants’ trial counsel (not Khan) of his concerns as the argument unfolded, and trial counsel attempted to address them. A few examples suffice. At one point, trial counsel stated: “Your Honour … your question is really pertinent and I’m relishing them.” During another exchange, trial counsel remarked: “Your Honour’s observations are exactly on point.” Towards the close of trial counsel’s submissions, the trial judge asked him how much more time he needed, to which he responded: “Your Honour, about 10 minutes but I have totally enjoyed your questioning”. Trial counsel then summed up and told the court that he relied on the relevant evidence and his factum. He concluded: “Thank you very much for Your Honour’s observations and all of which is respectfully submitted.”

[26] Nothing in the trial judge’s questions or comments give rise to a reasonable apprehension of bias, assessed from the perspective of a reasonable observer present throughout the trial: see R. v. Ibrahim, 2019 ONCA 631, 147 O.R. (3d) 272, at paras. 96-98.

[27] Finally, we see no basis to interfere with the trial judge’s costs ruling. The trial judge fixed Khan’s substantial indemnity costs for the summary judgment motion at $20,000. He also fixed Chaba’s partial indemnity costs for the counterclaim at $18,000. Setting off these amounts against each other, the trial judge awarded Khan net costs of $2,000.

[28] Because the respondent consents to leave to appeal from the costs order, we would grant leave to appeal. However, we do not disturb the costs order.

[29] A costs award should be set aside on appeal “only if the trial judge has made an error in principle or if the costs award is plainly wrong”: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 27.

[30] The appellants have not met this stringent test. The appellants say the trial judge erred in principle by reducing the 122 docketed hours (including over 50 by Khan) by 25% and by setting the value of Khan’s docketed time to $50 per hour for representing himself. They note the Law Society’s fee schedule for a lawyer of 12-20 years’ experience is $325 per hour. However, in fixing costs the trial judge did not apply an arithmetical formula of multiplying an hourly rate by the number of hours. Instead, he exercised discretion under s. 131 of the Courts of Justice Act to fix an amount that was “fair and reasonable for the unsuccessful party to pay”, citing Boucher v. Public Accountants Council for Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.), at para. 26. The appellants have shown no error in this exercise of discretion. We see no basis to intervene.

Disposition

[31] The appeal is dismissed. Leave to appeal costs is granted but the costs appeal is dismissed.

[32] If the parties cannot resolve the issue of costs of the appeal, the respondent may file a bill of costs and up to three pages of written submissions within 10 days of this decision, and the appellants may file a bill of costs and up to three pages of written submissions within 15 days of this decision.

“Doherty J.A.”

“Alexandra Hoy J.A.”

“M. Jamal J.A.”